The Trust Formula Family Offices Actually Use

0:02We're going to talk about trust next because everyone talks about the family office space. They talk about how they meet families, how families meet each other. So if you guys bear with me, I'll tell a quick one-minute story that will illustrate this unfortunately perfectly. So Milken, before COVID, I came over with a friend of mine. We ran a massive panel focused on family office and film with 60 different panelists all in this room. And I was with my friend Paul, and there was a lot of really good mocktails and drinks at the event. And then we went to the bathroom. and somebody saw his name tag in the bathroom and Paul's last name is Dalio and his dad Ray was going to speak soon after that and this guy came up as we're washing our hands just talking with us and he talks with us he's trying to figure out if I'm important if I'm important for Paul if Paul is going to get the vibe with him and if any of you have ever met Paul unless you care about the arts Paul's not going to have that conversation with you and we finish and we leave this bathroom and the guy wants to shake our hands to meet us and we look at him and we go dude you didn't even wash your hands because he was so focused on the opportunity he forgot to be human he forgot family offices are people too and he missed the opportunity because i was the gatekeeper running a company for ray paul had no interest in talking to them but by dismissing me and really disgusting Paul, he lost what he thought was his opportunity.

1:34So with all of you guys, right, everyone can approach you and go, I have a deal, I have a deal, I have a deal. But I want to talk about trust. Randy, I want to start with you. What builds trust for you, especially with 45 years of doing this yourself, to understand that an opportunity and the people behind it are something that you're going to spend your time and energy exploring. Yeah, so let me just say, so I spent 45 years running a national family office practice for a public accounting firm. I built, started family offices, so I got to meet a lot of people. And like even my family office, we have a, we're a very formal structure, so we have an investment committee.

2:15The investment committee has set up certain roles on how we establish trust and who we're going to meet with. but a lot of it is really past performance, who we meet from other families, relationships, friends, people we meet at different meetings, and also who have similar interests. The other things is we will also, with a family we trust, we will co-invest with the family, which is important to us. Where people say you got to have money in the game, it's key to us. Anybody we go in, they have to have money. They're invested or they've been involved for a while, but it's really getting to know the people you just don't make an investment meet somebody and then you make an investment you have to do due diligence and to the key to me which i found very subtle you have to build a relationship if you don't build a relationship with somebody it's not going to happen can i can i jump in if it's all right i was going to ask you next so i was listening to your story and thinking about what you shared and i've kind of really spent a lot of time thinking about this quotient like this equation for trust right like what is the equation that drives trust and it's in building relationships.

3:18And many of you may know this, have heard this before, but if you think about reliability, credibility, intimacy at the top, and then if you think about self-interest at the bottom, are you reliable? Are you credible? Is there intimacy in the relationship? If you add those up together, then you meet somebody new and they're not only shilling whatever it is they care the most about, meaning their self-interest quotient is lower, that math equation builds trust really fast, right? And that's something that I think over time has served me really well in building relationships and building trust. Am I reliable?

4:03Am I credible? Is there intimacy divided by am I all about me? And if that number on the bottom is lower and the top is higher, trust accelerates really fast. And I found if any other way, it slows down. And so that's something that hopefully could be helpful to some of the people in the room. That's been really helpful for me. Well put, Brian. Thank you. So Eric, the way you present yourself online, you had this reawakening to figure out what really mattered. So when that shifted in your life, not just the exit, but the focus with your family and health and everything, how did it shift for you in terms of how people approached what what you saw as valuable relationships, whether you're investing in what you call the boring stuff like real estate, or you're doing really exciting new defense stuff we can't talk about.

4:53So for the benefit of you in the room, what I think you're referring to here David was the wake up call that happened to me. So I was always trying to be the smartest guy in the room and chasing all these things and Silicon Valley all in all. And I was back in Stockholm and I was hanging out with my friends from my cycling club and I hadn't been racing my bike for a long time and then my brother calls me and he talks to me all the time but I heard something different in the tone and he said Eric stage four lymphoma my wife hasn't delivered yet so he calls me and he has like a pretty good chance of survival but he also had a pretty decent chance of not and that he tells me six hour before he becomes a father it changed me completely and I think that's what you referred to and I just start realizing how precious life is and in the context of trust building and who you want to be working with I shifted from trying to be you know a decently fast mountain bike racer to actually live my life till I'm 100 and live with a capital L-I-V-E and this was not like a plot or something for me to try to build my office around and how to you know work with better investments and get engaged with really great people but every single time I'm engaged in a conversation with someone that wants to invest with us and join our fund and you know invest alongside us the conversation is always around how do I actually live a better life how do I take care of my own health how do I take care of the people around me and for me that trust building is like very very meaningful i've helped people and i will never forget when this guy who made 25 million dollars out of an ipo we did in silicon valley he didn't need it he already had probably a couple of hundred but he was just so excited about that but he literally said i'm a little chubby it's like how do i get in shape how do i do this and i said you know just do this and i gave him some coaching on how to change his life and do that that trust building that comes of a human nature where you're actually truly helping people that's what I think is so important and was really changed our life and all interactions we have with people that are joining us with this that's the deeper conversation we have because I don't want to keep talking about AI forever everybody knows what that is but it has changed obviously all analytical cycles down from months and weeks into hours right it's all neutralized playing ground we can all vet the deals we can all make sure that we do that due diligence but the deep due diligence that you can do on a more human nature that only comes when you actually truly can share and you actually have some joint values for doing that so that's what I've learned and I find it extremely rewarding and for me it's so cool to see that we have all the tools that is doing all the stuff that used to take time and effort away from that but we just put that down now now it's all about actually getting to know the people behind that and that's what we are seeing in terms of the trust yeah very well said thank you for sharing that um the man who created what is named after him the dunbar number did research then for the following decade which showed that even in this current era to build real trust takes between seven to ten years and it is shortchanged by those that are purposeful Eric, as you're talking about, and Randy, you put that time in for decades with all these people to build that.

8:28And Brian, the comment on whether somebody is self-interested, it's very hard to find somebody who's purposeful, who's also incredibly selfish. It's much easier to find somebody purposeful where people can align. But James, the art world is entirely different. You are banking on things that in six months could be incredible or in 600 years could be that and having been in that art world for years myself there's such um fakery and pretension with so many people so how do you build trust in a space where you're backing people who you believe in and people also expect a return or a different valuation than their assets um by by being vulnerable which um thank you for sharing that story also that when we i i feel like just family offices investors maybe as people in general we get in our own way of allowing us to trust others and i think it's vulnerability that's a key component to that um all the people i like love in my life that I trust are people that can hurt me in some way can destroy me they choose not to then I like to think they choose not to in the moments when they could probably do it and get away with it so when we as investors let's say when we trust people with our capital or our time our thoughts at for for personal relationships our hearts when we give that to people and they actually cherish that and they don't use that against us that's when we know that this is a person that we can trust and we can actually do that really fast and we can do that quite nominally so uh that's when it comes to artists we uh you know we we act first they need the money they need the time they have questions whatever it is we give it and we see how it's returned great and I appreciate you sharing that because vulnerability is key.

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